Latest news, academic excerpts, commentary, book reviews and interviews on Fethullah Gulen and the Hizmet Movement (aka The Gulen Movement).

September 11, 2014

Turkey Risks Setting Dangerous Precedent, Bank Asya CEO Says

Turkish authorities haven't responded to pleas by Bank Asya that they act to prevent what the bank has called unfair attacks on it, Chief Executive Officer Ahmet Beyaz said.
The lack of action risks setting a dangerous precedent about the independence of regulatory agencies, he said.

In his first interview since Thursday, when a spokesman for Turkey's Banking Regulation and Supervision Agency said that the bank had been put under review under a law that gives the regulator broad powers over the lender, Mr. Beyaz accused BRSA officials of improperly revealing that the bank was under review under Article 70 of the nation's banking law, and damaging its brand. [Editor's Note: BRSA later denied news reports: BDDK says its official didn't speak to media on Bank Asya]

The law gives authorities broad powers to shuffle executive teams, halt transactions and recapitalize institutions in a last step before state seizure, but it also contains a requirement that such reviews remain confidential.

The BRSA didn't respond to requests for comment on Tuesday. Thursday, the spokesman described as accurate local media reports saying the step was taken because the bank hadn't taken steps to fix a deteriorating financial position, or couldn't be expected to succeed, but declined to elaborate.

"Banking is based on trust and reputation," Mr. Beyaz said, "Both of those are being manipulated."

Mr. Beyaz's comments are the latest salvo in an ongoing political battle that has ensnared the bank. The trouble began late last year, when followers of Fethullah Gulen, a U.S.-based Turkish cleric, leveled charges of graft against then-Prime Minister Recep Tayyip Erdogan's government, business allies, and family. Mr. Erdogan was forced to reshuffle his cabinet, but claimed that the allegations amounted to a "judicial coup" against his government.

After the graft cases were filed, the government replaced large numbers of prosecutors, and their successors dropped the cases. Mr. Erdogan went on to become Turkey's first publicly elected president in August, pledging to root out from Turkey what he has described as a Gulenist "parallel state."

Bank Asya, formally known as Asya Katilim Bankasi AS, has been caught up in the matter because high-ranking people within the bank and some of its shareholders are seen as followers of Mr. Gulen, according to Mr. Beyaz.

Bank Asya's chief said that because of a public view that the lender has ties to the cleric, it has been targeted by pro-government media, as well as coming under increased regulatory scrutiny, since the corruption charges surfaced in mid-December.

Mr Beyaz said the bank isn't associated with any particular entity. He pointed to the fact that more than half of its shares are publicly traded, and that foreign investors account for a majority of the public float.

Government ministers haven't replied to requests for comment.

Nine inspectors from the BRSA are now conducting reviews at Bank Asya, and at one point over the last nine months there were as many as 30 officials from various state agencies, Mr. Beyaz said. He said regulators hadn't asked the bank to replace any executives.

As Bank Asya became embroiled in the political struggle between Mr. Erdogan and the Gulenists, it lost its leading position among Turkey's four Islamic banks. Mr. Erdogan has used election rallies to urge his supporters not to do business with the Gulenists.

He alleged in July that Bank Asya was misleading its investors with disclosures about a potential Qatari partnership as its financial position was deteriorating.

During the first half of the year, Bank Asya's net profit plummeted 65% and deposits slumped 27% compared with the first six months of 2013. Its stock was down 40% this year through Aug. 7, when regulators halted trading of its shares. In late August, Moody's Investors Service cut Bank Asya's long-term deposit rating twice, by a total of five steps, to Ba2, the fifth-lowest junk grade.

Mr. Beyaz said Bank Asya has submitted a written request to regulators, asking them to allow trading to resume in its roughly 540 million publicly held shares. Officials haven't responded, he said.

"I don't know why our shares aren't trading," Mr. Beyaz said. "We gather from the exchange's statement that uncertainty over the shareholder structure is the cause. But we say whatever the shareholder structure was yesterday is the same today."

While the loss of deposits has put the lender in a difficult position, it has been able to weather the storm by simultaneously shrinking its loan portfolio by 19%, according to Bank Asya. Deposit are still declining, and the bank will continue its efforts to sell insurance, retirement and real-estate units to raise cash, Mr. Beyaz said.

Bank Asya's capital-adequacy ratio remains at more than 17%, which is higher than the average among all Turkish banks, the CEO added. The lender is open to merger and acquisition talks, he said, even though regulatory opposition in July derailed talks with Qatar Islamic Bank.

In early August, Deputy Prime Minister Ali Babacan, who is in charge of the economy, announced talks regarding a takeover of Bank Asya by the state-owned lender Turkiye Cumhuriyeti Ziraat Bankasi AS, Turkey's biggest bank by assets, saying the government desired a deal. But hours later, Mr. Erdogan's chief adviser, Yigit Bulut, scuttled the transaction, saying no deal was afoot.

Ziraat Bank said Aug. 21 it has ended unofficial talks with Bank Asya, saying the acquisition wasn't in line with its priorities.

Suggested Readings

Disclaimer: Copyrights and ideas in the articles belong to their respective owners. Hizmet Movement (Gulen Movement) Blog may not be held liable from the content of articles nor their potential misuse by third parties. Articles shared are not necessarily endorsed. Links and images used in the blog posts may differ from those at their original source. Translated articles are solely intended for the convenience of the readers, and may include minor errors.